Interactive Brokers Group Announces 2Q2019 Results

Business Wire 16-Jul-2019 4:01 PM

Income Before Taxes of $225 Million on $413 Million in Net Revenues, Earnings Per Share on Net Income of $0.43 and Earnings Per Share on Comprehensive Income of $0.46.

Declares Quarterly Dividend of $0.10 Per Share.

Interactive Brokers Group, Inc. (IEX:IBKR), an automated global electronic broker, reported diluted earnings per share on net income of $0.43 for the quarter ended June 30, 2019 compared to $0.57 for the same period in 2018, and diluted earnings per share on comprehensive income of $0.46 for the quarter, compared to $0.39 for the same period in 2018.

Net revenues were $413 million and income before income taxes was $225 million this quarter, compared to net revenues of $445 million and income before income taxes of $271 million for the same period in 2018. The results for the quarter were positively impacted by strong growth in net interest income, which increased $34 million, or 15%, from the year-ago quarter; partially counterbalanced by lower commissions revenue, which decreased $7 million, or 4%, from the year-ago quarter.

In addition, the results for the quarter also include a $6 million loss on our currency diversification strategy, compared to a $21 million loss in the same period in 2018; and a $74 million mark-to-market loss on our investment in Tiger Brokers.

The Interactive Brokers Group, Inc. Board of Directors declared a quarterly cash dividend of $0.10 per share. This dividend is payable on September 13, 2019 to shareholders of record as of August 30, 2019.

Business Highlights

• 54% pretax profit margin for this quarter, down from 61% in the year-ago quarter.
• 64% Electronic Brokerage pretax profit margin for this quarter, unchanged from the year-ago quarter.
• Customer equity grew 14% from the year-ago quarter to $153.1 billion and customer debits decreased 11% to $25.7 billion.
• Customer accounts increased 19% from the year-ago quarter to 645 thousand.
• Total DARTs¹ increased 4% from the year-ago quarter to 828 thousand.
• Brokerage segment equity was $6.4 billion. Total equity was $7.6 billion.

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¹ Daily average revenue trades (DARTs) are based on customer orders.

Segment Overview

Electronic Brokerage

Electronic brokerage segment income before income taxes increased 7% to $302 million in the quarter ended June 30, 2019, compared to the same period last year. Net revenues increased 7% to $473 million on higher net interest and other income, partially offset by lower commissions revenue.

Commissions revenue decreased 4% from the year-ago quarter on lower customer trading volume across most product types, which reflected smaller average trade sizes. Net interest income increased 16% as average customer credit balances and benchmark interest rates increased from the year-ago quarter. Other income increased 3% on higher net mark-to-market gains on our U.S. government securities portfolio and higher fees earned from our Insured Bank Deposit Sweep Program. Pretax profit margin was 64% for the quarter ended June 30, 2019, unchanged from the same period last year.

Customer accounts grew 19% to 645 thousand and customer equity increased 14% from the year-ago quarter to $153.1 billion. Total DARTs for cleared and execution-only customers increased 4% to 828 thousand from the year-ago quarter. Cleared DARTs were 740 thousand, slightly higher than the same period last year.

Market Making

Market making segment income before income taxes increased 22% to $11 million in the quarter ended June 30, 2019, compared to the same period last year, primarily due to lower operating costs in the remaining operations.

Corporate

For the quarter ended June 30, 2019, we recognized a mark-to-market loss of approximately $74 million in our strategic investment in Up Fintech Holding Limited ("Tiger Brokers"), compared to a mark-to-market gain of $103 million recognized in the first quarter of 2019 after its initial public offering on March 20, 2019. As a result, we recognized a net gain of $29 million for the six months ended June 30, 2019.

Effects of Foreign Currency Diversification

In connection with our currency diversification strategy, we have determined to base our net worth in GLOBALs, a basket of 14 major currencies in which we hold our equity. In this quarter, our currency diversification strategy increased our comprehensive earnings by $10 million, as the U.S. dollar value of the GLOBAL increased by approximately 0.24%. The effects of the currency diversification strategy are reported as components of (1) Other Income in the corporate segment and (2) Other Comprehensive Income ("OCI").

Regulatory Matters

The Company is subject to regulatory oversight and examination by numerous governmental and self-regulatory authorities. It is currently providing information to certain of such authorities, including FINRA, the SEC, the CFTC and the United States Department of Justice, and cooperating with those authorities. The Company believes that the regulators are focused on compliance practices, including anti money laundering and Bank Secrecy Act practices. The Company periodically reviews these practices to make them more robust and to keep pace with changing regulatory standards, and the Company has been enhancing and augmenting its procedures and personnel in these areas over the past several years. While the outcome of the examinations and inquiries currently in progress cannot be predicted, the Company does not believe that they are likely to have a materially adverse effect on the Company's financial results.

Conference Call Information:

Interactive Brokers Group, Inc. will hold a conference call with investors today, July 16, 2019, at 4:30 p.m. ET to discuss its quarterly results. Investors who would like to listen to the conference call live should dial 877-324-1965 (U.S. domestic) and 631-291-4512 (international). The number should be dialed approximately ten minutes prior to the start of the conference call. Ask for the "Interactive Brokers Conference Call."

The conference call will also be accessible simultaneously, and through replays, as an audio webcast through the Investor Relations section of the Interactive Brokers web site, www.interactivebrokers.com/ir.

About Interactive Brokers Group, Inc.:

Interactive Brokers Group affiliates provide automated trade execution and custody of securities, commodities and foreign exchange around the clock on over 125 markets in numerous countries and currencies, from a single IBKR Integrated Investment Account to customers worldwide. We service individual investors, hedge funds, proprietary trading groups, financial advisors and introducing brokers. Our four decades of focus on technology and automation has enabled us to equip our customers with a uniquely sophisticated platform to manage their investment portfolios at the lowest cost according to Barron's Best Online Brokers review, February 25, 2019. We strive to provide our customers with advantageous execution prices and trading, risk and portfolio management tools, research facilities and investment products, all at low or no cost, positioning them to achieve superior returns on investments.

Cautionary Note Regarding Forward-Looking Statements:

The foregoing information contains certain forward-looking statements that reflect the Company's current views with respect to certain current and future events and financial performance. These forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the Company's operations and business environment which may cause the Company's actual results to be materially different from any future results, expressed or implied, in these forward-looking statements. Any forward-looking statements in this release are based upon information available to the Company on the date of this release. The Company does not undertake to publicly update or revise its forward-looking statements even if experience or future changes make it clear that any statements expressed or implied therein will not be realized. Additional information on risk factors that could potentially affect the Company's financial results may be found in the Company's filings with the Securities and Exchange Commission.

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES OPERATING DATA

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES NET INTEREST MARGIN  (UNAUDITED)

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES SEGMENT FINANCIAL INFORMATION (UNAUDITED)

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES EARNINGS PER SHARE ON COMPREHENSIVE INCOME (UNAUDITED)

INTERACTIVE BROKERS GROUP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)     

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